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Zacks Investment Research upgraded Ultra Clean Holdings Inc. (UCTT - Snapshot Report) to a Zacks Rank #1 (Strong Buy) on Mar 11, 2014. Going by the Zacks model, the companies holding a Zacks Rank #1 have strong chances of performing better than the broader market.

Why the Upgrade?

Ultra Clean Holdings reported impressive fourth-quarter 2013 results on Feb 18, 2014. Since then, shares of the company have spiraled up 20.3%. Earnings per share in the quarter were 26 cents, surpassing the Zacks Consensus Estimate of 23 cents 13.0%.

Revenues in the quarter increased 40.2% year over year to $126.0 million. Of total revenue, roughly 93.7% was Semiconductor revenue. Revenue generated from international operations was 29.1%. Gross margin increased 430 basis points year over year to 17.1%.      

For first-quarter 2014, Ultra Clean Holdings anticipates revenues to be within the $135–$140 million range and adjusted earnings per share to be within 28–31 cents. At mid-points, the revenue guidance reflects a sequential increase of 9.1% while the earnings guidance is a 13.5% increase over the previous quarter.

Fourth-quarter 2013 results triggered upward revisions in earnings estimates for Ultra Clean Holdings. In the last 30 days, the Zacks Consensus Estimate has increased 33.8% to $1.07 for 2014. The estimate also reflects year-over-year growth of 102.4%. Earnings growth for the next 5 years is predicted to be 11.5%.

Earnings growth rates as well as a positive average earnings surprise of 11.8% have made us optimistic about Ultra Clean Holdings’ performance in the coming quarters.
Other Stocks to Consider

Ultra Clean Holdings is a $39.9 million company operating in the semiconductor industry. Other stocks worth considering in the industry include Tessera Technologies Inc. (TSRA - Analyst Report), Canadian Solar Inc. (CSIQ - Analyst Report) and SolarCity Corp. (SCTY - Snapshot Report). While Tessera Technologies and Canadian Solar carry a Zacks Rank #1 (Strong Buy), SolarCity Corporation holds a Zacks Rank #2 (Buy).

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